Sports/entertainment venue the centerpiece of live, work, play plan called Downtown South
Posted June 24, 2019 10:05 p.m. EDT
Updated June 25, 2019 9:56 a.m. EDT
Raleigh, N.C. — A sense of déjà vu may be appropriate in downtown Raleigh on Tuesday as realty developer John Kane and tech entrepreneur Steve Malik unveil plans for a proposed $1.9 billion mixed-used retail, residential, and entertainment project in the southern portion of the city’s downtown district. At its center would be a 20,000-seat stadium whose anchor tenants would be Malik’s North Carolina Football Club and North Carolina Courage professional soccer teams.
Nearly two years ago, Malik occupied another stage in the nearby City Market district for a rally announcing a similar stadium project in conjunction with Kane Realty that would be located in the state-owned Halifax Mall area of downtown Raleigh. Kane wasn’t on the dais with Malik in July 2017, but Major League Soccer President Mark Abbott was, the guest of honor at an event held in conjunction with Malik’s then-nascent Raleigh MLS expansion bid.
MLS appears no closer to making Raleigh its newest outpost. Yet, while Tuesday’s press event may feel a bit like a reprise of pomp and architectural renderings, there are a number of differences, and lessons learned, from two years ago.
“As I’ve been on the trail now for two years listening to people and trying to respond to state, county, and city officials, what became really clear is that Raleigh wants a downtown entertainment venue,” Malik said. “Of the five largest cities in North Carolina, Raleigh is the only one without a downtown stadium of any kind. As a matter of fact, we’re probably the largest city in the South without a downtown stadium. For us to take the next step as a community, as we see downtown Raleigh grow, this is about the 75 other events [other than soccer] and the hundreds of smaller events, and having a place designed that can move the traffic in and out when we want to do big festivals.”
With the multi-purpose, open-air stadium as its focal point, the planned Downtown Raleigh Entertainment District, aka Downtown South, will sit on 55 acres and comprise 1.6 million square feet of commercial space, over 125,000 square feet of street-level retail space, 1,200 hotel rooms, and over 1,700 multi-family residential options ranging from workforce to luxury. Malik admits that, as recent as several months ago, serious consideration was given to reducing the proposed stadium’s capacity by as much as half. However, the results of a market survey that guided Kane and Malik’s ultimate planning demonstrated a desire for 20,000 seats.
The biggest change from 2017 is land and location. Whereas the site for Kane and Malik’s stadium project was once aspirational, they’ve now secured the development rights to approximately 130 acres located in and around Penmarc Drive in south Raleigh. The bulk of the acreage is inside the notch formed north of Interstate 40 and east of South Saunders Street, extending west to South Wilmington Street, whose potential conversion into a major transit corridor as recommended by the 2017 Southern Gateway Corridor Study would further enhance access to the complex. Malik says they have also secured several dozen additional, adjacent acres south of I-40 and west of South Saunders, but the use of those parcels has yet to be determined.
Walnut Creek bisects the property and includes a floodplain that can’t be developed. However, Malik believes “there’s some amazing stuff we can do with Walnut Creek. There’s an existing greenway path, and we are able to take advantage of that and have some beautiful green space in the midst of an urban development.”
The site is also within a designated Opportunity Zone. Opportunity Zones were established by Congress in the Tax Cuts and Jobs Act of 2017 to encourage long-term investments in low-income urban and rural communities nationwide.
“Opportunity Zones allow for capital gains from anything to be invested in census-tract, underprivileged economic areas,” Malik says. “There are about 8,700 in the country. In Raleigh, there’s one from Red Hat Amphitheater south past I-440. In those areas, you can take an unrealized capital gain and invest it and avoid paying tax on the gain for as long as 10 years. You also get a step-up in tax basis. There’s very favorable tax treatment for investment in the Opportunity Zones.”
Emphasis turns from MLS to local soccer supporters
While Kane will be front and center for Tuesday’s press conference, MLS will be mostly missing. Raleigh’s expansion effort remains active and ongoing, and Malik stresses that Downtown South enhances his bid as MLS continues to add expansion slots. However, Malik says this project fills a community need regardless of MLS.
“I’ve talked to literally hundreds of people, and while soccer is something that’s obviously important to me, when you talk about a $1.9 billion development, people want entertainment downtown,” Malik says. “We asked in our survey how important is it that this project include MLS, and frankly it’s not that important. People would love to come out and see a variety of events, soccer being part of them.”
That’s not to say soccer is isn’t an integral element for this project. “Soccer has a strong history in our area,” Malik says. “We currently have 14,000 players in our youth club plus 25,000 of their parents, and that’s just a snapshot. If you go back to the 40-year history of soccer in this community, the level of support for a project like this is off the charts.”
While Tuesday’s unveiling is intended for the media and public, the other target audience were the decision-makers for Wake County’s Room Occupancy and Prepared Food and Beverage Tax funding. In January, the county requested information about future hospitality projects that could be funded using the interlocal tax funds as part of its required review of the financing and capital maintenance plans for the Raleigh Convention Center and PNC Arena. Downtown South was one of eight groups that presented a funding request, asking for $13 million per year over 30 years beginning in fiscal year 2022 for debt service and annual maintenance of the estimated $180 million privately-funded stadium.
Last week, the interagency review group headed by the managers for Raleigh and Wake County issued funding recommendations that included PNC Arena, the convention center, a Cary indoor sports facility and several smaller projects, but no funding was specifically earmarked for Kane and Malik’s project. Instead, Downtown South would have to vie against other competitors for a total of $42.1 million tapped for “medium projects.” The final decision on interlocal funding rests with the Raleigh City Council and Wake County Commissioners, who could vote on final appropriations in August or September.
A steadfast Malik cites the results of a recent independent economic impact study commissioned through Economic Leadership, LLC that concludes Downtown South would generate $3.8 billion in economic activity over 15 years for Wake County. Malik contends that without interlocal funding, Downtown South “doesn’t happen on this kind of scale. No investment has happened in that area [of Raleigh] like we are talking about, and we need a catalyst to make it work.”
“We are the project that aligns with the eight strategic priorities of the Destination 2028 study done by Jones Lang La Salle [JLL] for the Greater Raleigh Convention and Visitors Bureau,” Malik says. “We check every box. We provide economic equity to an area of town that very much needs that investment, to participate in the growth that the rest of the city has enjoyed. We’re working with that community to make this project impactful for that part of town. We just completed an economic impact analysis and we’re estimated to bring 5,900 new jobs. We’re partnering with Wake Tech to put programs in place so that those are not empty promises, that we provide a range of jobs that, in large part, can go to people in that community.”
Malik also cites an estimated $20 million in yearly property taxes generated by Downtown South, as well as an additional $3.7 million per year in contributions back to the interlocal fund itself, for which the North Carolina FC and its youth tournaments are already one of the largest generators.
“We generate 21,000 hotel nights per year [in Wake County],” Malik explains. “We generate an additional 10,000 hotels nights outside of Wake County because a lack of availability. There are many communities around the country gunning for our tournament business. We need a home base to secure the future of the impact of our tournaments. This project would do that, not to mention the state income tax generated by that many new jobs.”
Kane and Malik say they would like to begin construction on the project in early 2020 with the first phase, including the stadium, completed by 2023. But a lot more money and will are still needed before Downtown South becomes a reality.
“It is a transformational development,” Malik says. “The survey results we’ve gathered from all of Wake County shows support in the 80 percent range. When people find out we’re willing to make a private investment of $1.9 billion, the support goes up even more. So this is the best use for a public-private partnership to drive future benefits for our region.”
